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Accounting for 29.1 billion payments valued at $72.6 trillion in 2021, Automated Clearing House (ACH) payments are one of the leading electronic payment methods available today. With ACH payments comprising a large portion of today’s transactions, merchants should educate themselves on this payment method, including how to properly handle the event of an ACH return. In this article, we explain why ACH returns occur and take a closer look at ACH return code R40.
What Is an ACH payment?
An ACH payment is a type of electronic funds transfer from one financial institution to another through the Automated Clearing House Network. Only available to United States-based financial institutions, these transfers are entirely electronic. As such, no physical record is necessary to initiate or accompany an ACH payment.
The National Automated Clearing House Association (NACHA) governs the ACH network. NACHA develops and enforces the set standards for ACH payments. Additionally, NACHA maintains a list of standardized ACH return codes to easily communicate why an ACH payment failed. As a result of this standardization, a three-character code as simple as “R40” indicates exactly why your customer’s ACH payment failed, how to properly troubleshoot the underlying issue, and how long it will likely take to resolve.
Regardless of the specific issue, an ACH return indicates that the ACH Network was unsuccessful in collecting funds from one account and transferring them to another because the transfer did not meet NACHA’s standards.
What Does ACH Return Code R40 Mean?
ACH return code R40 is unique in that it is at the sole discretion of a federal government agency. To receive ACH payments from the federal government, the recipient must enroll with their associated federal agency. These entries contain automated enrollment (“ENR” for short) only available for federal benefit payments. Return code R40 is related to an error in the automated enrollment process.
Formal definition
The formal definition for ACH return code R40 is as follows: Return of ENR Entry by a Federal Government Agency.
Solutions to Fix R40 Return Code
Unless your business works with the federal government, it is highly unlikely you will encounter ACH return code R40 in your business operations. However, if you do receive this return code for a business transaction, it’s important to note it cannot be resolved at the merchant level. ACH return code R40 remains at the sole discretion of the associated federal agency. Therefore, neither you nor the associated financial institutions have much control over resolving the return.
Additionally, there is no expected timeframe for the resolution of ACH return code R40. Try to remain patient while the government agency handles the underlying issue.
Final Thoughts
The return of an ACH payment is frustrating. Encountering ACH return code R40 can be particularly frustrating because you must rely on the government agency to troubleshoot the issue. But even still, ACH payments offer many benefits, including speed, security, and low ACH processing fees. You shouldn’t let the rare event of a return deter you from accepting ACH payments at your business and reaping its many benefits.
